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Fed Avoids Finalizing Mortgage Reform, CFPB Takes Over

Plans to execute three mortgage proposals under Regulation Z are being put on hold until after the transfer of authority to the Consumer Financial Protection Bureau (CFPB) takes place on Tuesday.

The proposals covered a range of topics, including consumer disclosures under the Truth In Lending Act (TILA) for home equity lines of credit and closed-end mortgage loans, new disclosures for reverse mortgages, and restrictions on certains sales and marketing practices.

It took thousands of comments consisting of conflicting viewpoints to dissuade the Fed from pursuing the proposals and instead the Fed decided to defer to the new Consumer Financial Protection Bureau.

General rule-making authority over TILA will be transferred to the CFPB in July. Within 18 months after the transfer date, the CFPB is required to submit a proposal that combines the mortgage disclosures required by the TILA and the required Real Estate Settlement Procedures Act (RESPA) disclosures.

Many of the most recent developments in the reverse mortgage industry can be quite complicated and difficult to navigate.  At the Reverse Mortgage Group, we can help you by connecting you with a qualified reverse mortgage professional.

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Convert your Home Equity into Cash Money without Changing the Ownership

If you are 62 years of age or older and are in need of urgent cash, the idea for applying reverse mortgage loan is a good option. You may find yourself in a situation when you need cash but cannot stand any more monthly loan payments. In these situations, you can turn a part of your home equity into cash money to fulfill other commitments.

The primary benefit for seniors is to make any monthly payments and be free from all financial burdens as a result of this type of loan. On the other hand, you have a burden to pay monthly payments from other types of loans and are worried that the lender can take your home if you fail to pay their monthly installments on time.

In addition, you will receive cash as a lump sum amount, monthly payments, credit line, or a combination of all these. You have the options available to you and you have the control over the disbursement method.

The Internet is a useful source of reliable service providers who can assist you the information you need about the pros and cons associated with a reverse mortgage loan. If this is a good option for you to pay-off your debts while being free of the financial liability, then you can start the application process for a reverse mortgage loan to secure your ownership.

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Top 5 Factors for Applying Reverse Mortgage Loans

Senior citizens are always afraid to apply for loans to maintain their lifestyle and way of living. They are always in fear that the lender will take away their home in return of the loan or they will be burdened with monthly loan payments. A new type of loan which is a senior reverse mortgage loan helps the seniors with cash money without taking their home. Senior reverse mortgage loan is also known as Home Equity Conversion Mortgage (HECM).

Hereunder are the top 5 factors which are considered for preferring reverse mortgage loan over any other type of loan for seniors:

  1. The lender can’t take your home in return of the cash. So, this type of loan will not change the ownership of the home under any circumstances.
  2. It is considered as the tax-free alternative in comparison to the other options which you have in order to obtain immediate cash.
  3. The value of the home, HECM interest rate level and the age of the borrower have direct influence of the amount which a senior homeowner will get in return of this type of loan.
  4. A senior doesn’t have to pay any monthly payments back to the lender. The amount is recovered by selling the home after he passes by or shifts to another place.
  5. It is an obligatory insurance in which the capital, interests and other costs are recovered from the home selling price and rest of the amount is taken from the insurance. This means that the lender will get the entire amount and the borrower will never have to lose his other assets.

Seniors who don’t want to inherit their property to their children or relatives are a great fit for this type of loan. In addition, debt will not be incurred to those that inherit remaining assets. One can spend their golden years in peace and assurance.

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Poor 401(k) Performance Causes Increase in Reverse Mortgages Issued

Let’s face it. The current economic atmosphere is almost absent of 401(k) gains. The massive losses taken in the 401(k) arena is leaving senior homeowners struggling financially.

Home Equity Conversion Mortgages, or HECMs, have been around for over 20 years.

In those years, 637,000 have been granted and by July 2010, over 500,000 were still active. That is over 7 percent of the almost 7,000,000 owner-occupied homes that people age 65 and older are occupying (recorded by the U.S. Census Bureau survey in 2008). Approximately 99 percent of the reverse mortgage market is represented by HECMs. Each is insured by the Federal Housing Administration (FHA).

Rising Demand

Lower upfront costs for HECM borrowers and the need for additional income indicate that demand for HECMs will rise for the foreseeable future. As many borrowers prepare for decreased income, statistics show that most borrowers of HECM loans are 62 and 63 years old.

At the close of 2008, individuals between 55 and 64 years old showed a median value of $56,000 for 401(k)s/IRAs, 30% down from $78,000 by the close of 2007, states the Federal Reserve’s Survey of Consumer Finances

What’s New

HUD introduced the HECM Saver on October 4, 2010.  The HECM Saver deeply cuts the upfront costs for borrowers needing loans smaller than standard HECMs.  With a mortgage insurance premium of .01% (rather than the standard 2% of the loan value), the HECM Saver offers trade off in exchange for reducing the loan size.

HUD is also improving the counseling process by offering alternative benefits to HECM loans as well as hearing verification to ensure the borrower completely understands what is being discussed.

Investor demand for securitized pools of HECMs is increasing. This is leading to more competitive interest rates.  Lenders are also waiving upfront mortgage insurance premiums for fixed-rate mortgages.  At 2% of the first $200,000 of the home value plus 1% of the remainder (up to $6,000), the savings are dramatic.  Many lenders are also waiving origination fees, which can be 2% of the appraised value of the home.

Next Step

For a comprehensive analysis of your ability to qualify, contact our office today to speak with a professional HECM specialist. If you don’t qualify, or if a HECM is not right for you, we will be the first one to let you know. If you do qualify, we can help you achieve the best rates available.

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Reverse Mortgages in California, Florida, and Arizona

Now that homes are upside down in the states of California, Florida, and Arizona, the regions hit hardest by the economic collapse, seniors are looking for ways to supplement their income to keep their home and memories.  Seniors that took out reverse mortgage loans before the recession began live in homes that are upside down, but their reverse mortgage amounts are still being honored.

86-year-old mother Florence took out a reverse mortgage on her home in Cape Coral, FL, in 2006. At the time, the home was appraised for $260,000 and she qualified for a $160,000 reverse mortgage guaranteed by FHA (Federal Housing Administration).

This loan, called a Home Equity Conversion Mortgage, or HECM for short, allows seniors 62 or older to borrow money against the equity in their home without making any monthly loan payments. Interest and annual insurance premiums are added to the loan principal.

The balance of the loan is to be paid back when the borrower dies, sells the house, or moves out within one year, but extensions are available.

Interesting fact: if the balance of the loan is somehow higher than the value of the home, the FHA insurance fund will cover the difference.  The borrower will not be held responsible for falling home values.

In October, 2010, Florence has a loan balance of about $75,000 and about $105,000 remaining in her line of credit, but the home value has fallen to about $80,000.

Now that the home value is lower than her available line of credit, the question is: does Florence get to keep the balance of the reverse mortgage line of credit?

The answer is yes.

“She can absolutely take out that $105,000,” says Susanna Montezemolo, a vice president with the Center for Responsible Lending.

“The lender must honor the mortgage contract as originally written,” says FHA spokesman Lemar Wooley. The amount of money she is entitled to from the line of credit will not change.

The declining home values have inspired change in policy and the 2011 budget approved by the Obama administration. The FHA announced that there will be changes to reduce risk and increase annual mortgage insurance premiums.

For more information about reverse mortgages or home equity conversion mortgages, contact us now.

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Home Equity Conversion Mortgage (HECM) Saver

HECM Saver is a new Reverse Mortgage product that was just release by HUD (Department of Housing and Urban Development).

With an extremely low MIP (mortgage insurance premium) of only .01% of the property’s value, the costs of a HECM loan is now at record lows. HECM Standard is currently at 2% of the property value or 2% of the maximum FHA loan limit of $625,500 if the property value is higher.

The great news about the HECM Saver is that lower loan amounts are now available; about 10% – 18% less than that of a HECM Standard. This is good because the lower principal limit decreases the risk to the FHA insurance fund, and the reduction in risk is turned into a benefit to borrowers.

HECM Standard is available for fixed rate and LIBOR-based loans.

Contact us now for an easy-to-understand explanation of HECM Saver and how it can help you. Or call us at 888-820-2627 (please mention the website).

Is your property located in Arizona, California, Colorado, Connecticut, Florida, Georgia, Idaho, Maryland, Massachusetts, Michigan, Nevada, Oregon, Texas, Utah, Virginia, or Washington?  Our specialists are standing by to help. Contact us now for more information.

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RMG NEWS : Origination Volume Up 25% in FY 2009

Volume of the FHA’s Home Equity Conversion Mortgage (HECM) grew to $30.2 billion in Fiscal Year 2009 according to budget documents released earlier this week.

Despite only a slight increase in endorsed units, max claim volume grew 25% compared to the prior Fiscal Year total of $24.2 billion.

According to data from Reverse Market Insight, 22% of the increase in volume comes from the lending limit increase, and the remaining 3% stems from the additional units in FY 2009.  In addition, the shift to the fixed rate product has also been a factor.

“The shift to the fixed rate product further magnifies the increased dollar volumes spurred by higher lending limits, as the unpaid principal balance (UPB) is up 31% for FY 2009,” said John K. Lunde, President of RM Insight.

HECM Trends“At a time when declining home values and recession dominated the headlines, our industry acted as a key safety net for seniors and provided more funds to more customers in FY 2009 than ever before.”

Looking at the calendar year numbers is even more telling, while units were down 2.9% in 2009, the max claim amount and UPB totals were up 26% and 42% respectively from the last year.

Whether or not the industry will continue to grow in Fiscal Year 2010 is another story.  The Office of Management and Budget is predicting the industry will endorse 120,429 units in 2010 while FHA’s Outlook Report shows a prediction of 106,875 units for FY 2010.

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RMG NEWS : Legislation Update

Senator Dodd and President ObamaSenator Chris Dodd (D-CT) and President Obama met face-to-face on Tuesday. Reports suggest that Dodd may drop the proposed Consumer Financial Protection Agency from the emerging Senate Financial Services Bill, in order to gain the support of some Republicans and centrist Democrats. One administration official said the President’s position in favor of the inclusion of the Consumer Financial Protection Agency in the bill is, “nonnegotiable.”

President Obama proposed a new tax on the nation’s biggest banks to pay for the financial bailout. Several leading reverse mortgage lenders, such as Bank of America, MetLife, and Wells Fargo, are included in this category.

The Federal Housing Administration (FHA) announced a series of sweeping changes on Wednesday to help the agency restore its financial reserves and reduce its risk.

HUD announced this week that it’s expanding a temporary policy to help borrowers access FHA mortgage insurance and allow for quick resale of foreclosed homes. HECMs are specifically exempted.

Scott BrownWith the victory of Scott Brown (R-MA) in the special election to fill the late Senator Ted Kennedy’s seat, the Democrats have lost their 2/3 majority in the Senate, enough to overcome any vetoes.

Brown’s victory also concerns Democrats who are worried that their party will suffer heavy losses in the midterm elections this fall.

President Obama’s State of the Union address is planned for January 27, 2010.

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More Realtor Education Needed to Increase HECM For Purchase Volume

With the FHA predicting a surge in Home Equity Conversion Mortgages (HECM) for Purchases next year to 3,420, up from 423 in 2009’s fiscal year, it seems a little surprising that the industry isn’t more optimistic about the program.

Monte Howard“Everyone in the industry was really excited about it when we realized we were going to get the HECM for Purchase product,” said Monte Howard, Affinity Relationship Director at Generation Mortgage.  But this excitement has proven to be short-lived as the dramatic burst in business has yet to be realized.

After several conversations with professionals in all parts of the reverse mortgage industry, it is clear the problem with the unique reverse mortgage for purchase program is education.  This education needs to take place on several levels, but the first is educating Realtors.

Derry HamptonDerry Hampton, a reverse mortgage professional at Security 1 Lending and a licensed Realtor, pointed out just how little realtors know about the product.
“No one’s talking to Realtors about how this can fit into their business,” said Hampton, “I think really it’s up to the reverse mortgage industry to learn how to work with the real estate industry.”
A member of the National Association of Realtors (NAR) and the California Association of Realtors (CAR), Hampton added, “In California alone, there are 170,000 members of the CAR – that’s the new market for the reverse mortgage industry… what we need to do is teach them about this product.”

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Reverse Mortgage Volume in Canada Sees Big Boost from Lower Rates

Canada saw fourth quarter origination of reverse mortgage  jump to $43 million, according to the HOMEQ Corporation.
homeqHomEquityBank, a subsidiary of HOMEQ Corporation, saw an increase of 77% over the same period last year and an increase of 11% over the previous record set in the second quarter of 2008.

Steven Ranson“Our ability to access cost-effective and reliable sources of funding as a bank has allowed us to lower our cost of borrowing and pass the savings to our customers. The increase in originations during the last quarter is an early indication that our pricing strategy is working and that our reverse mortgage offering is being transformed from a niche product into a mainstream financial solution,” said Steven Ranson, President and CEO.

Earlier this year HomEquityBank received its federal bank charter allowing it to gather deposits and allow it to offer lower rates to consumers.

Ranson told the Wall Street Journal that they now charge 3.75% on a variable-rate reverse mortgage (its lowest ever), and only 1.5 percentage points above prime.  Five-year terms are available at 6.1%.

During the 2008 credit crunch, when funding rates soared, HomEquity’s rates were as high as prime plus 5 percentage points, according to Ranson.  “Pricing is now more comparable” to other options seniors may have, making a reverse mortgage far more appealing.

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